chapter05probsetc - PROBLEM SET C PROBLEM 5-1C Flos...

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PROBLEM SET C PROBLEM 5-1C Flo’s Interior Designsuses a perpetual inventory system. It entered into the following calendar- year 2005 purchases and sales transactions: Jan. 1 Beginning inventory 60 units @ $40/unit April 1 Purchase 75 units @ $48/unit April 5 Sales 50 units @ $80/unit July 7 Purchase 30 units @ $42/unit Aug.12 Purchase 40 units @ $50/unit Sept. 2 Sales 65 units @ $80/unit Totals 205 units 115 units Required 1. Compute both cost of goods available for sale and the number of units available for sale. 2. Compute the number of units remaining in ending inventory. 3. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) specific identification ( note: 50 units from beginning inventory, 50 units from the April 1, and 15 units from the August 12 purchase are sold), and (d) weighted average. 4. Compute the gross profit earned by the company for each of the costing methods in part 3 . Analysis Component 5. If Flo’s manager earns a bonus based on a percent of gross profit, which method of inventory costing will the manager likely prefer? PROBLEM 5-2C Karen Company’s financial statements reported the following. Karen recently discovered that in making counts of physical inventory, it made the following errors: Inventory on December 31, 2004, is overstated by $4,000, and inventory on December 31, 2005, is understated by $6,000.
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